1. A zero coupon bond with a face value of $1,000 is issued with an initial price of $492.96. The bond matures in 15 years. What is the implicit interest, in dollars, for the first year of the bond's life? Use semiannual compounding.
2. Suppose you have taken out $25,000 in student loans. The repayment will take the form of equal monthly payments for the next 10 years. If the interest rate on student loans is 4%, how much total interest will you pay throughout the life of this loan?
3. Which of the following bond has the highest interest rate risk?
a) 20-y & 4% coupon
b) 10-y & 4% coupon
c) 30-y & 2% coupon
d) 30-y & 4% coupon